Geographic Distance and Municipal Internal Control Reporting

Advances in Accounting, Forthcoming

Posted: 27 Jan 2017

See all articles by Dennis M. Lopez

Dennis M. Lopez

University of Texas at San Antonio

Kevin T. Rich

Marquette University - Department of Accounting

Date Written: 2017

Abstract

Prior research has investigated various factors affecting auditor performance when examining the internal control system of an entity. However, one factor that remains relatively unexplored is the geographic distance between auditors and their municipal clients. This study explores whether geographic distance, measured as the driving distance between U.S. municipalities and their external auditors, plays a role in the likelihood and severity of internal control weaknesses identified during Circular A-133 audits. We find evidence of a positive association between the disclosure of internal control exceptions and driving distance, suggesting that audit rigor is greater for geographically distant clients. Overall, our findings contribute to our understanding of the factors affecting auditor independence and performance in the municipal audit market.

Keywords: Auditor Independence, Auditor Performance, Circular A-133 Audits, Federal Programs, Geographic Distance, Internal Controls, Municipal Audits

JEL Classification: M40, M41, M42, M48, M49

Suggested Citation

Lopez, Dennis M. and Rich, Kevin T., Geographic Distance and Municipal Internal Control Reporting (2017). Advances in Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2906496

Dennis M. Lopez (Contact Author)

University of Texas at San Antonio ( email )

One UTSA Circle
San Antonio, TX 78249
United States
210-458-4320 (Phone)
210-458-4322 (Fax)

HOME PAGE: http://business.utsa.edu/

Kevin T. Rich

Marquette University - Department of Accounting ( email )

College of Business Administration
PO Box 1881
Milwaukee, WI 53092
United States

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